China is Taiwan`s stepping stone

Stan Shih, chairman of the Acer Group, is retiring at the end of next year after nearly three decades building his company into Taiwan's only internationally recognized computer brand name. Taipei Times' staff reporter Bill Heaney talked to Shih last week about the secret of his success and finds out that the industrial guru will be far from idle after handing over the reins of Acer to his successor TT: You have said that you want to concentrate on turning Acer into a world-class service provider before you retire at the end of next year. How do you intend to achieve that goal?Stan Shih: The future of Taiwan lies in the service business. If you consider the proportion of the Taiwan economy that is now devoted to services, it is still very small, so the room for improvement in the services industry is much larger than in the manufacturing industry.IBM and HP have shifted to the service business. The difference is that they are based on the mainframe business. Our core business is the personal computer (PC). Acer is also trying to get involved in IT services, but with a non-traditional approach. Acer is trying to look at what the future requirements of the industry are, and then we will start to make our own way into that future.TT: Since you published the book Me Too is Not My Style in 1996 Acer has continued to stand out as the only truly global Taiwanese brand in the technology industry. Why do you think Taiwanese companies have not followed your example and branded themselves globally? And why are the vast majority of companies still following the "me too" style of manufacturing?Shih: "Me too" is risk-free to begin with. You cannot innovate a product just for the market in Taiwan. The cost is too high and the returns too small. In many cases, Taiwanese companies are not in the position to do innovation because they are too far away from their end market. Acer more than 20 years ago started to promote its own innovation. At that time the IT market was so small, which allowed companies like Acer or Apple to grow. But today to get into mainstream business you need to be innovative. Take Dell Computer Inc for example. It is innovative in its channels, not in products. In PCs, no-one has a unique position, so they lose money. If you are innovative on the product without a return, there's no incentive to work that way.TT: The government is trying to promote Taiwan as a knowledge-based society. What role is Acer playing in this development?Shih: We should not just talk about Taiwan. It's every country that is moving towards a knowledge base because it's a natural shift. Technology products are in oversupply. There is no value and that is not good for economic development. Look at DRAM and many consumer electronics. If you don't inject the knowledge into a product or service, it's problematic.Fortunately Acer from the first day of business was involved in the knowledge-based economy, doing research and development (R&D) and brand-name promotion. If you can put more services and technology into manufacturing, then you can enhance the value of the original fundamental manufacturing capability -- just like the semiconductor industry. Foundry services are a service business, they are not only manufacturing. They have more knowledge about customer needs.Acer's Aspire Park also tries to concentrate an environment that is good for the knowledge-based economy. A computer is a simple technology, but when you are talking about a smart society, many other areas of knowledge are involved. Unless there is someone to bridge the gap between the technology and the user, then it has no benefit for society.TT: What was the biggest hurdle you faced in building a global brand?Shih: Because the home market was too small, we could not train enough talent for international management to export our knowledge overseas. When we went to the US, Europe and other countries, all the practices were totally new and we had to recruit local people. We thought about localizing in the Acer way. But what was the Acer way? It wasn't established then. If Acer just Americanized its practice in the US, following the traditional American way, we would have become a third-class American company. Unless we brought something better than the American way and then converted it to the Acer American way, we cannot win in that market. The key is strong local talent. Then you have to jointly develop a unique way, not follow the others or you cannot compete according to their game rules.TT: What success have you had building your latest brand -- BenQ Corp -- and how did you do it?Shih: Originally the BenQ product line carried the Acer name and that created a lot of internal and channel conflicts. Because BenQ's management team is from Acer, they have more than 10 years experience with the company so that when they decided to establish a brand name they had a good foundation. They have the experience and resources to invest and to accelerate the growth of the new company. I think they did a really good job in a short period of time. Now with BenQ and Acer together -- and later other brand names -- it will help Taiwan gain recognition for its tech brands. TT: You said that you plan to give other companies advice on branding once you retire. Have you been approached by any companies looking for your help and advice? And are there any particular companies you would like to single out that would benefit from global branding?Shih: In the early 1990s I was the founder of the Brand International Promotion Association with Giant, Travel Fox and Proton. My advice to them was start from Greater China, and establish some size. Then gain experience and know-how, so that you can go global gradually. Today, as the environment is so challenging, so there are not so many Taiwan companies involved in global branding. You need innovation and you have to consider what are the sustainable core factors. Do you have enough resources to support the move, or can you commit top management long-term to that development? You also have to establish something good for the future: image, a talented team, technology etc. I think today after more than two years of effort in engineering we have established a very solid foundation to become one of the very few PC players that is making a profit and has a sustainable business model. HP is number one or two and is losing money. That makes no sense in the long run. TT: You said in a media interview recently that you are tired of your responsibilities as head of the Acer group. Are you considering handing over more responsibilities to your successors before you retire?Shih: It was a simple statement that created a misunderstanding. I have worked for Acer for 27 years already. It's normal to feel tired after all this time. In the past 27 years I have continued to adopt decentralized management in power and people. I have trained more top executives in the Taiwan IT industry than anyone else. I continue to transfer much of the power to my supporting executives or successors. In early 1990s I made two famous statements: that Acer is a group of dragons without heads which means everyone can make their own decisions, and that I enjoy losing power to others. That's been my style of management for more than 10 years. I delegate to my successors many established responsibilities. For example I delegated chairmanship of BenQ to Lee Kun-yao, and Wistron Corp to Simon Lin and the current core business of Acer to Wang Chen-tang.We will come up with something that is unique in the industry by the end of this year, but we are not ready to announce it yet. I would like to initiate and establish a basic foundation for Wang, and then he can take it from there.After I retire I will invite some of the senior executives in Acer to found a new company called China Soft Capital as a tentative English name. It's not about hard cash capital, it's brain capital. We're going to offer our knowledge and experience to other companies. It's like financing companies with brain power.TT: Have you found that the competition you now face from BenQ and Wistron is pushing Acer to achieve new goals or are you eventually planning for Acer to step out of the areas that BenQ and Wistron are now doing well in?Shih: That was always my approach. I continue to establish a new stage for talent upon which they put their own effort. I also try to try to eliminate some of the internal political conflict that is very common in an organization. I try to give [managers] space to do their own thing in indirect competition. That is more effective for us all to make progress.TT: Do you feel Taiwan's future is inextricably linked with China?Shih: The future of Taiwan is in global markets. Taiwan doesn't have enough resources for its global markets, so they have to leverage the resources in China. It's easy for Taiwan companies to gain an advantage there. Another major factor is that if Taiwan wants to establish more of a presence in branding and marketing, China is the foundation. Taiwan needs the resources of China to maximize its growth.TT: In a recent report, Acer president Wang Chen-tang said that he plans to regain the No. 5 position globally from No.7 now. What is your forecast for Acer's performance this year? How does the computer business look in the last two quarters of this year?Shih: I think overall PC market growth will be very small -- a few percentage points. Acer is expecting maybe 30 percent growth this year. What is important to Acer is its new indirect business model with direct supply chain management. If we continue this formula, and continue to enhance effectiveness, we will gain more market share. Source: Taipei Times